Bhargava bats for lower car GST, says it will power sales

Maruti Suzuki is banking on a looming tax cut to power domestic growth especially for its small cars, even as it prepares a stronger export push through a more cohesive partnership with its parent Suzuki Motor Corp.

A potential GST (goods and services tax) cut from 28% to 18% on small cars may give the original small-car maker in India a big boost by making them more affordable, according to R.C. Bhargava, Maruti Suzuki’s chairman.

“Lower GST rates are needed as US tariffs are causing disruptions in other Indian industries,” Bhargava said at Maruti Suzuki’s annual general meeting on Thursday.

Bhargava has long argued that small car demand was falling as prices had gone beyond the spending capacity of consumers in that segment due to stricter emissions norms and other regulatory requirements, which increased costs.

Maruti Suzuki has also been pushing for more tax and regulatory benefits for hybrid cars in India, a technology its parent has mastered in Japan. Prime Minister Narendra Modi, who earlier this week flagged off the first electric car to be manufactured by Maruti Suzuki, said at the event that hybrid vehicles were a cornerstone of India’s clean mobility push.

Alongside, Maruti and Suzuki Motor are forging a closer alliance to streamline operations and position India as a global hub for hybrid and electric vehicle (EV) production. The idea is to develop strengths in different models in the two countries and prevent duplication, Bhargava said.

As part of increased collaboration, Suzuki has committed to invest ₹70,000 crore in India over the next five to six years, Toshihiro Suzuki, president of Suzuki, said during the inaugural ceremony of e-Vitara on Tuesday. The company is looking to make India its hub for EV production to export majorly to European and Japanese markets.

The GST difference

Bhargava’s comments come at a time when Maruti Suzuki is seen as a key beneficiary of a proposed tax cut on small cars — a segment it rode to market leadership four decades ago — from 28% to 18%.

Small cars were once dominant in India — and Maruti’s bread-and-butter segment — for many years, but now trail other forms by a vast margin.

The fall has been nothing short of dramatic. The mini segment, which comprised cars like Alto, fell to 6% share of Maruti's total domestic sales in FY25 from 36% in FY15. In that period, sales of the Alto halved from 265,000 units to 126,000 units.

The GST cut, if it happens, is expected to remedy that a bit and lower prices to thresholds that are affordable for that segment’s buyers.

To be sure, the GST Council is scheduled to meet on 3-4 September, where it will be considering, among other things, a reduction of taxes on small cars and two-wheelers. If the tax rates on small cars go down, it will reinvigorate the growth rate of the country’s car industry, Bhargava said.

India’s 4.3-million-units-a-year car market is the fourth largest behind the US, China and Japan.

Maruti + Suzuki

Meanwhile, Maruti Suzuki and its parent have reached an agreement to forge a deeper technical and strategic alliance, streamline operations, and prevent duplication of efforts. According to Bhargava, Suzuki is working to make India a production base for a number of cars to be exported to the global market.

“We have to work with a much better mutual understanding of all issues to avoid any kind of duplication and to maximize the synergies of what is available in Japan and what is available in India,” he said. This will benefit the two companies, as well as the governments and economies of India and Japan, said Bhargava, the 91-year-old public-servant-turned-entrepreneur.

“We chose this facility to manufacture the e VITARA, our first BEV (battery electric vehicle), and make it a global production hub for this model. We will export this 'Made-in-India BEV' to over 100 countries, including Japan and Europe,” Toshihiro Suzuki, representative director and president, Suzuki Motor Corporation, said in his address at the line-off ceremony of the cars in Hansalpur, Gujarat that was attended by the Prime Minister.

As part of the effort to eliminate duplication, boards of the two companies would meet twice a year, once in each country. While the Suzuki board flew into India three months ago, Maruti’s board is slated to visit Japan in November.

The two companies have strong collaboration on exports already, with many made-in-India cars finding their way to Japanese shores. The company exported the three-door Jimny from India for several years before introducing a five-door version for India. Maruti Suzuki has also started making the e-Vitara for exports to over 100 countries, before it rolls out the electric crossover in India in a few months.

The company has long been a leading exporter of cars from India, shipping out over 330,000 vehicles in FY25, 17% more than the previous year. Maruti Suzuki accounted for two out of every five cars exported from India during the year.

“With the help of Suzuki Japan and Toyota, our strategy is to keep growing exports out of India,” Bhargava said.

Powertrains

Suzuki is pursuing the development of multiple powertrain technologies and closer collaboration with a cost-efficient partner like Maruti will help both the companies, said Saji John, senior research analyst at Geojit Financial Services.

“For global OEMs right now, tariff-related costs are high, so they will look to unlock cost savings,” he said, adding that Maruti’s focus is shifting towards international markets, so working closely with Suzuki will be crucial to ensure the efforts don’t add new costs.

“In exports, the e-Vitara is expected to be profitable at the Ebit level from day one itself," analysts at Motilal Oswal Financial Services, wrote in a 26 August note. Ebit refers to earnings before interest and tax.

Hybrid tussle

Even as Maruti Suzuki and Toyota make a pitch for incentives on hybrid cars at par with EVs, they have been locked in a tussle with carmakers like Tata Motors and Mahindra & Mahindra, which have opposed incentives to hybrids given their heavy investments in electric vehicle (EV) technology.

However, earlier this year, the state of Delhi floated a draft EV promotion scheme that proposed incentives for hybrids as well, causing an uproar from the EV lobby. Uttar Pradesh already incentivizes the sale of hybrid cars in the state.

Regulations

Maruti Suzuki has also pushed for easier emission reduction norms for small cars compared to the rest of the market, which has again met resistance from its rivals.

Bhargava pitched for India to learn from Japan’s introduction of Kei cars in the 1950s—smaller compact vehicles meant as an affordable alternative for two-wheeler owners.

“They are smaller, have lower safety regulations and are subject to lower taxes than other cars,” the nonagenarian said. “I think India needs to consider something similar to that.”

Bhargava has been a staunch critic of the increasingly stricter regulations for cars in India. He believes that the higher cost of cars as a result of these regulations makes them more expensive for the millions of two-wheeler users, pushing back their upgrade to four-wheelers. Two-wheelers tend to be much less safe in a crash than a car, he said.

“In 2018-19, it was decided that European Safety and Emission Standards should be introduced in India and that has been the reason for the downtrend in small cars,” he said. “We believe that we need to balance this situation in a manner that the users of two-wheelers can move to safer cars because two-wheelers are the most risky in terms of safety.”